US Department of Commerce fines 'Applied Materials' $252 million for illegal chip exports to China

The U.S. Department of Commerce on Wednesday announced a $252 million settlement with semiconductor equipment maker Applied Materials (AMAT.O) over illegal exports to China’s largest chipmaker, Semiconductor Manufacturing International Corp. (SMIC), AzerNEWS reports via Reuters.

According to the department, Applied Materials shipped ion implanters—a key tool for chip production—through its South Korean subsidiary to SMIC without obtaining the required U.S. export licenses. The shipments took place 56 times during 2021 and 2022 and were valued at roughly $126 million.

The case stems from SMIC’s inclusion on the U.S. Commerce Department’s “Entity List” in December 2020 due to alleged ties to the Chinese military, which restricted the export of certain goods and technologies to the company.

In 2023, Reuters reported that Applied Materials was under criminal investigation for producing semiconductor equipment in Massachusetts, shipping it to South Korea for assembly, and then forwarding it to SMIC in China, bypassing U.S. export controls.

Applied Materials said it was pleased it had reached a settlement with the Department of Commerce, and that the U.S. Department of Justice and the U.S. Securities and Exchange Commission had notified the company that they had closed their related investigations without action.

The Department of Justice did not immediately respond to a request for comment. The Securities and Exchange Commission declined to comment.

The $252 million penalty - twice the transaction value - is the maximum allowed by law, the department said.